What is volume??

When I started trading, I was familiar with volume which was in geometry. If you are not aware of this term in stock market then don’t worry, I’ll help you.

Volume in stock market is very important factor to look at while taking buy or sell position. Volume is like an early indicator for any changes in price movement.

First of all what is volume? Volume is traded quantity of a stock for a given day. Suppose person A sell 100 stocks of TISCO and Person B buys those 100 stocks in same day, that means total volume of TISCO for that day is 100.

Volume is used for determining the current trend of the stock.If the stock moves higher or lower with strong volumes, it justifies that day’s movement in the stock.

I know your next question is how to determine if the volume traded is strong or weak, it is usually decided by comparing current day’s volume with average volume of last two weeks (14 trading days). Am I being too technical, don’t worry I am not trying to explain any rocket science here. Let me explain with the example.

I’ll take the current scenario of reliance communication.

On 1st September price was up by Rs.3 to Rs.263 with 7,558,100 as Volume. Average Volume for that day was 5,788,958 so this movement is justifying the increase in price on that day. After that it went up all the way to Rs.317. During this there were time when volume was higher than average volume but not by significant amount.

On Oct 6, RCOM slided to 268 from 299 on that day traded volume was 31,398,500 whereas average volume was 10,535,551 on NSE. Traded volume was almost 3 times higher than the average volume. That justified the down trend started in RCOM, it is trading at Rs.228 right now. These data are readily available on NSE or yahoo charts.

Morale of the story is, volume helps you identify the short term trend but volume is not the only indicator to identify short term trend.

There can be certain exceptions, generally on FNO (Futures and Options) expiry day, volume have unexpected movements, wait for one or two trading days after expiry day to confirm the trend.

Hope I am putting all these in simple and easy terms. I tried to get the chart but i was unable to include it in this post. If you know how to insert a chart, please let me know.

Off for Dhan Teras puja..

Wishing you all a happy Diwali in advance !!

P.S. My Diwali Muhurat Picks

• Bharti Airtel
• TISCO
• Financial Technology
• Camlin Ltd.

Let me know what you’re buying on muhurat !!!